Delivers the following judgment, which was adopted
on the last-mentioned date:

PROCEDURE

1. The case originated in an application (no.
37598/97) against the Republic of Finland lodged with the European Commission
of Human Rights (“the Commission”) under former Article 25 of the
Convention for the Protection of Human Rights and Fundamental Freedoms
(“the Convention”) by a Finnish national, Mr Tomas Bäck (“the
applicant”), on 10 July 1997.

2. The applicant, who had been granted legal aid,
was represented by Mr C. Näsman, a lawyer practising in Vasa. The Finnish
Government (“the Government”) were represented by their Agent, Mr
A. Kosonen, Director at the Ministry of Foreign Affairs.

3. The applicant alleged a violation of his property
rights under Article 1 of Protocol No. 1 on account of the almost total
extinction – through a debt adjustment – of a claim he had had against
another individual.

4. The application was transmitted to the Court
on 1 November 1998, when Protocol No. 11 to the Convention came into
force (Article 5 § 2 of Protocol No. 11).

5. The application was allocated to the Fourth
Section of the Court (Rule 52 § 1 of the Rules of Court). Within that
Section, the Chamber that would consider the case (Article 27 § 1 of
the Convention) was constituted as provided in Rule 26 § 1.

6. On 1 November 2001 the Court changed the composition
of its Sections (Rule 25 § 1). This case was assigned to the newly
composed Fourth Section (Rule 52 § 1).

7. By a decision of 22 October 2002, the Chamber
declared the application partly admissible.

8. The applicant and the Government each filed
observations on the merits (Rule 59 § 1) and replied to those of the
other party.

9. On 25 March 2003 the Court decided to hold
a hearing on the merits (Rule 54 § 3).

10. In April 2003 third-party comments were received
from the Governments of the Netherlands, Norway, Sweden and the United
Kingdom, which had been given leave by the President to intervene in
the written procedure (Article 36 § 2 of the Convention and Rule 44
§ 2). The parties replied to those comments (Rule 44 § 5). The third-party
comments are summarised below.

11. The hearing on the merits took place in public
in the Human Rights Building, Strasbourg, on 1 July 2003 (Rule 59 §
3).

12. Mr L. Garlicki later replaced Mr M. Fischbach,
who was unable to take part in the further consideration of the case.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

13. The applicant was born in 1957 and lives in
Karperö. In 1988 and 1989 he and another person contracted to guarantee
a bank loan granted to N. As N. was eventually unable to meet the reimbursement
conditions, the applicant and his co-guarantor each paid the bank approximately
113,000 Finnish markkas (FIM) (approximately 19,000 euros (EUR)), excluding
interest, in 1991.

14. In 1995 N. applied for a debt adjustment in
accordance with the 1993 Adjustment of Debts (Private Individuals) Act
(laki yksityishenkilön
velkajärjestelystä, lag om skuldsanering för privatpersoner
57/1993 – “the 1993 Act”) and proposed a payment schedule for the
court’s approval. The applicant opposed the request, arguing that
such an adjustment could lead to an unjustified deprivation of his property,
consisting of his claim against N. The applicant argued that N. was
young and healthy and could be expected to be able to reimburse his
debts to the guarantors in due course. In the alternative, the applicant
requested that the adjustment of N.’s debts be postponed.

15. On 19 April 1996, after N. had found employment,
the District Court (käräjäoikeus, tingsrätten) of Korsholm granted him a debt
adjustment and adopted a payment schedule which was to take effect on
1 June 1996 and remain in force for five years. The applicant’s claim
against N. was reduced to FIM 2,168 (EUR 365). The District Court considered
that N.’s solvency had been significantly weakened on account of his
previous unemployment and unsuccessful business activities. Given that
N. was already able to reimburse FIM 420 (EUR 71) per month to his creditors
at the time of the court’s examination, it was not possible under
the 1993 Act to postpone the entry into force of the payment schedule.
The District Court gave the following reasons:

“... With reference to Tomas Bäck’s submission,
the District Court notes that under the Adjustment of Debts (Private
Individuals) Act it is possible to reduce the amount of a claim and
even to write a claim off. Considering that a guarantee always involves
a risk as to the possible obligation to pay the creditor and the possibility
of recourse against the principal debtor, the District Court finds that
the claim in question cannot be considered as a possession that would
enjoy inviolable protection under the European Convention on Human Rights.
...”

16. Among N.’s seventy other creditors was F.
bank, with a claim amounting to FIM 231,722 (EUR 38,973), of which the
District Court retained FIM 4,510 (EUR 759) as part of his payment schedule.

17. The applicant appealed, contending that the
almost total extinction of his claim against N. violated his property
rights under the Convention. No legislation on debt adjustment had existed
at the time when the applicant had contracted to guarantee N.’s debts.
Furthermore, the extreme step of writing off his claim discriminated
against him as a private creditor who, unlike creditor banks, would
receive no compensation from the State.

18. On 14 October 1996 the Vasa Court of Appeal
(hovioikeus,
hovrätten) upheld the District Court’s decision and its reasoning.
The applicant was refused leave to appeal to the Supreme Court (korkein oikeus,
högsta domstolen) on 19 February 1997.

II. RELEVANT DOMESTIC LAW AND PRACTICE

19. The 1993 Act was enacted during a recession
in the Finnish economy, one of its purposes being to reduce the high
volume of unpaid debts owing to banks. The banks received substantial
subsidies from the State in compensation. Under the 1993 Act, a court
may write off debts on condition that the debtor agrees to a payment
schedule in favour of the creditors determined by the court (section
25). The court assesses the income needed to cover the debtor’s essential
living expenses and to meet any obligation to pay allowances (sections
4-5). The excess income is to be used to pay off the creditors during
a fixed period in amounts determined by the court (section 23).

20. If the debtor fails to comply with the payment
schedule or contracts a new debt, the schedule may be annulled, thereby
enabling all creditors to claim payment as if no debt adjustment had
been granted (section 42). If the debtor’s ability to pay or other
conditions change significantly while the reimbursement scheme is in
force, the debtor must inform the creditors within one month (section
7). Both the debtor and the creditors may seek to have the payment schedule
amended, extended or annulled while it remains in force or, in certain
circumstances, within five years from the adoption of the schedule (sections
30 and 61). If the payment schedule is amended in favour of the creditors,
it may be extended by a period corresponding to the period during which
the debtor’s ability to pay had improved (section 44).

21. The court may hear submissions from one or
several creditors, guarantors and co-debtors before deciding on the
request for debt adjustment (section 52). An appeal lies to the relevant
appellate court, unless it is specifically prohibited or concerns a
procedural matter (section 63).

22. At the material time, the court could obtain,
at the request of a creditor, the relevant information on the possible
existence of circumstances which could lead to the refusal of an application
for debt adjustment. Since 1997 the court can also obtain this information
of its own motion.

23. In its parliamentary bill (no. 183/1992),
the government noted that an insolvent private individual seldom had
enough possessions to repay a creditor, as the bankruptcy costs had
priority. Neither could a declaration of bankruptcy eliminate a natural
person’s future responsibility for his or her debts. Allowing an adjustment
of the overall debts and fixing a payment schedule could help the debtor
meet his or her future financial obligations, provided he or she complied
with that schedule. Such assistance would also reduce the overall cost
to society. The courts should seek to adjust a debt in the manner least
detrimental to the creditor and only to the extent that such an adjustment
was necessary to remedy the debtor’s financial situation. Since underlying
contractual terms should be interfered with as little as possible, the
partial or total extinction of a claim should be considered as a very
last resort. The possibility of ordering a payment schedule to remain
in force for five years would enable the creditors to receive at least
partial satisfaction. It was noted that somewhat similar legislation
for debt adjustment had been, or was being, enacted in countries such
as Denmark, France, Germany, Norway, Sweden and the United States of
America.

24. In 1997 the 1993 Act was amended, inter alia, so as to tighten further the conditions for granting
a debt adjustment (section 9a and section 10). A further amendment provided
for the possibility of extending the payment schedule for a further
two years, for exceptional reasons and provided the creditor was also
a private individual (section 31a). These amendments were not applicable
to the applicant’s case.

III. THIRD-PARTY INTERVENTIONS

A. The Netherlands Government

25. The Netherlands Government agreed with the
respondent Government’s views and drew attention to the Debt Repayment
(Natural Persons) Act (Wet schuldsanering natuurlijke personen) which came into force
in the Netherlands in 1998 and was similar to the Finnish legislation.

26. In their view, declaring that the full or
partial repayment of debts was no longer enforceable ipso jure at the end of a debt-repayment procedure did not
contravene Article 1 of Protocol No. 1. Both the Finnish and Netherlands
laws on debt adjustment served the public interest as they were aimed
at preventing personal bankruptcy. As a result of bankruptcy, people
were frequently discouraged from setting up an income-generating activity,
since by so doing they would face claims from old creditors. Bankruptcies
also placed a heavy burden on society and creditors did not benefit
from having to pursue bankrupt debtors for years on end. Debt-adjustment
procedures sought to satisfy all parties concerned by striking a proper
balance between their respective interests. This complied with the letter
and spirit of Article 1 of Protocol No. 1.

27. They noted, finally, that a guarantor voluntarily
took the risk that not all the funds he or she might have to pay to
a creditor could be recovered from the debtor. The Convention did not
afford protection against such a risk.

B. The Norwegian Government

28. The Norwegian Government joined the respondent
Government in arguing that the debt adjustment provided for in the respective
States’ legislation did not contravene the rights which Article 1
of Protocol No. 1 afforded to creditors.

29. The Norwegian Debt Settlement Act of 1992
(Act relating to Voluntary and Compulsory Debt Settlement for Private
Individuals – gjeldsordningsloven) contained provisions similar to those
found in the Finnish legislation. The Norwegian Act served vital societal
goals and struck a balance between competing interests. The primary
purpose of the Act was to rehabilitate individuals with serious and
permanent debt problems by affording them an opportunity to regain control
over their financial affairs, in the absence of which they easily became
dependent on the social welfare system on a permanent basis. In addition,
the Act was intended to ensure that debtors would fulfil their obligations
as far as possible and that the distribution of a debtor’s assets
would be organised properly. The position of creditors was not to be
weakened any more than strictly necessarily.

C. The Swedish Government

30. The Swedish Government likewise agreed with
the arguments of the respondent Government and referred to the Swedish
Debt Adjustment Act (skuldsaneringslagen) of 1994. This legislation essentially
corresponded to the Finnish legislation and was of vital importance
to society as it sought to rehabilitate individuals with very large
debts, affording them a chance to lead a decent life. The legislation
applied to residents in a “qualified” state of insolvency who appeared
unable to pay their debts within the foreseeable future. In the longer
term, severe insolvency not only created suffering for the individual
concerned but also resulted in a loss of production, an increased need
for care and treatment, and an expansion of the grey sector of the economy.

31. The debt-adjustment legislation also had a
preventive effect, as it lessened the interest of credit institutions
and others in lending money without verifying the prospective debtor’s
solvency. This in turn reduced the risk of individuals facing a serious
debt burden.

32. The rehabilitating purpose of the legislation
was weighed against the individual creditors’ interest in maintaining
their claims. Hence a further purpose of the Swedish legislation was
to protect the creditors as a group, since the debtor would be paying
at least part of his or her debt to each of them. Creditors were thus
likely to receive a better dividend on their claims than would otherwise
have been the case.

33. By the end of 2002, over 32,000 applications
had been lodged and some 12,000 persons had been granted a debt adjustment
in Sweden.

34. When the Swedish legislation was being considered
(Government Bill 1993/94:123), it was noted that debt adjustment would
not amount to a deprivation of property, even though it would limit
the creditor’s possibility of asserting a claim or even extinguish
it. A claim against a debtor in a “qualified” state of insolvency
would largely be of a merely formal nature, as the creditor could hardly
expect to receive any payment. Through debt adjustment, the creditor
could obtain payment of at least part of the claim’s nominal value.
Against this background, and bearing in mind the significant general
interest in favour of debt adjustment, the Swedish Government concluded
at the time of enacting the 1994 Act that a scheme to that effect would
not contravene Article 1 of Protocol No. 1.

D. The United Kingdom Government

35. The United Kingdom Government considered that
even if Article 1 of Protocol No. 1 came into play, any interference
with the rights of creditors was justified as regards a bankruptcy system
involving the cancellation of debts in whole or in part. Cancellation
of debts was a common feature of many bankruptcy schemes in the western
world, including that of the United Kingdom. Debtors could get into
financial difficulties for reasons which were not of their own making.
Bankruptcy schemes were aimed at rehabilitating the debtors, both financially
and socially. The absence of these schemes could have adverse social
consequences, as the very existence of debts might prevent an individual
from carrying on certain activities. If debtors who had failed in business
could not be discharged from their debts, this could act as a deterrent
to entrepreneurship and responsible risk-taking.

36. Creditors such as the applicant could protect
their position by not dealing with a particular debtor; by inquiring
into the debtor’s financial position; by asking for a security; by
taking out an insurance policy; or by obtaining a guarantee from a third
party. At any rate, creditors were presumed to be acting in the knowledge
of insolvency law and its consequences.

THE LAW

ALLEGED VIOLATION OF ARTICLE 1 OF
PROTOCOL No. 1

37. The applicant claimed to be the victim of
a breach of Article 1 of Protocol No. 1, which provides:

“Every natural or legal person is entitled
to the peaceful enjoyment of his possessions. No one shall be deprived
of his possessions except in the public interest and subject to the
conditions provided for by law and by the general principles of international
law.

The preceding provisions shall not, however,
in any way impair the right of a State to enforce such laws as it deems
necessary to control the use of property in accordance with the general
interest or to secure the payment of taxes or other contributions or
penalties.”

A. The parties’ submissions

1. The applicant

38. The applicant complained under Article 1 of
Protocol No. 1 that N.’s debt adjustment had deprived him of his property
without compensation and without serving a legitimate aim in the general
interest. The adjustment had effectively transferred to N. an amount
equal to the applicant’s net income per year, thereby placing an unreasonable
burden on the latter.

39. Whilst accepting that the interference was
lawful, the applicant contended that it was disproportionate to the
aim sought to be achieved. As a creditor he had been unable to avail
himself effectively of his right to question the fairness of N.’s
proposed payment schedule, being unable to obtain information on N.’s
financial situation or to hear evidence from him under oath in respect
of his debts. Equality of arms had not been ensured and the time available
for opposing a request for debt adjustment had been short. Moreover,
the duty under section 53 of the 1993 Act to investigate the debtor’s
financial situation had not been properly fulfilled by the enforcement
authorities. Due to the substantial number of debt adjustments at the
relevant time, the courts’ examination of each request had been extremely
summary in nature.

40. As a result of the adjustment, the applicant’s
claim had been reduced from FIM 118,500 (approximately EUR 20,000) to
FIM 2,168.41 (EUR 365). The adoption of N.’s debt-adjustment scheme
had therefore practically extinguished a claim on his part, the existence
of which had already been confirmed by a court. As a rough guess concerning
the market value of his possession before the debt adjustment, the applicant
estimated that a transfer of his claim to a debt-collection agency would
have yielded 50% of its nominal value.

41. In the applicant’s view, it had been contrary
to the 1993 Act to grant N. a debt adjustment. N.’s responsibility
for his heavy debt burden was his alone and his debts had been only
temporary in nature, given his age. Had the applicant’s claim not
been extinguished, he could have sought payment of N.’s debt in a
few years.

42. While accepting, in general, that Article
1 of Protocol No. 1 and the public-interest considerations justified
a wide margin of appreciation being granted to the Contracting States,
the applicant was opposed to direct property transfers from one citizen
to another as in the case of a debt adjustment. Finland’s serious
recession at the beginning of the 1990s did not justify such direct
property transfers. Nor had the debt-adjustment legislation been repealed,
even though the country was no longer facing a crisis of that kind.
A more appropriate policy for supporting debtors and avoiding serious
social consequences would be in the form of a State allowance. If, as
the Government argued, debt adjustment sought to alleviate and prevent
social problems, the State should at least abandon its fiscal claims
against debtors. In the payment schedule adopted for N., the county
tax authority was to receive over FIM 3,000 (EUR 505) on a claim with
a book-value of FIM 155,000 (EUR 26,069). Thus, through the almost total
extinction of his own claim, the applicant had indirectly had to contribute
to securing N.’s payment of a fiscal claim.

43. The applicant argued, moreover, that while
the adjustment of N.’s debts may have saved him from “social misery”,
at the same time similar misery was created for creditors. The interference
with the applicant’s property rights had placed too heavy a burden
on him in comparison with N. The applicant contested the Government’s
assertion that through the debt adjustment he had been ensured the reimbursement
of an amount higher than that which he could have hoped to receive without
such an adjustment. The amount which the applicant had been required
to reimburse as co-guarantor of N.’s loan had amounted to roughly
the applicant’s annual salary. Whereas the applicant had been obliged
to pay off for fifteen years the loan he had been forced to take out
in order to reimburse half N.’s loan, N.’s responsibility for paying
his court-reduced debts had been limited to a period of only five years.
At the time, however, it had been estimated that N. would have thirty-one
years left in which to work before retiring.

2. The Government

44. The Government recognised that the impugned
measures constituted an interference with the applicant’s right to
the peaceful enjoyment of his possessions or, in the alternative, amounted
to a deprivation of his property and thus fell to be considered under
the second sentence of the first paragraph of Article 1 of Protocol
No. 1. It was their view, however, that this provision had not been
violated.

45. The Government noted that the adjustment of
N.’s debt to the applicant had been granted pursuant to the 1993 Act,
which constituted a law within the meaning of Article 1 of Protocol
No. 1 that was adequately accessible and sufficiently precise. The aim
of the 1993 Act was to ensure that an individual with financial difficulties
would be able to improve his or her financial situation, thereby preventing
the negative effects of insolvency on society as a whole, such as social
exclusion, health and social problems and an expanding grey sector of
the economy.

46. They explained that the large number of debt-adjustment
cases at the relevant time had largely resulted from the unfavourable
economic climate of the 1990s and the increase in borrowing by households
and companies in previous years. The extensive marketing of credits,
favourable economic developments and the general expectations of economic
growth had encouraged some households to take out loans without sufficient
guarantees of being able to repay them, and the credit institutions
had not been sufficiently interested in verifying the solvency of debtors.
A sudden and strong increase in unemployment, a reduction in the net
income of households, a significant rise in interest levels and a strong
decrease in house prices had created strong social and political pressure
to establish a system under which unreasonable debt burdens on private
individuals could be resolved. As the debt problems of private individuals
were prevented or resolved through debt adjustment, there was less need
for the unfruitful use of the court system and enforcement authorities.
The need for social assistance was also reduced.

47. The Government pointed out further that debt
adjustments were implemented in accordance with a payment schedule fixed
for several years, taking into account the de facto solvency of the debtor. That way, the debtor was afforded
a way out of a hopeless debt situation and was able to plan his or her
future in a sensible and realistic manner. The improvement of the debtor’s
financial situation also ensured that the creditors’ claims were reimbursed
to the fullest extent possible, albeit with a longer payment schedule.
An arrangement which ensured a debtor’s present and future capacity
for earning an income also served the interests of creditors. Where
a debtor failed to pursue actively the reimbursement of debts, due to
financial difficulties which he or she found insurmountable, the creditors
usually did not receive any payments. When account was taken of the
debtor’s de facto ability to repay his or her debts, the creditors could
expect to have at least part of their claims satisfied. As a result
of the assessment of the debtor’s solvency, the creditors also avoided
the useless and costly measures of recovering debts.

48. The Government concluded that the 1993 Act,
which sought to ensure a balance between the interests of the parties
concerned, undoubtedly served a legitimate “public interest” for
the purposes of Article 1 of Protocol No. 1, even to the extent that
it might imply the transfer of property from one individual to another.
Debt-adjustment legislation was also common in other member States of
the Council of Europe.

49. The Government submitted further that the
interference with the applicant’s property rights was in proportion
to the legitimate aim sought to be realised. The issue of the proportionality
of the 1993 Act had been discussed at length in the Standing Constitutional
Law Committee of Parliament as well as in its Standing Legal Affairs
Committee. They had emphasised the need to give due consideration to
the protection of property provided for in the 1919 Constitution, meaning
above all that the weakening of the creditors’ position, although
inevitable, should not lead to unreasonable results. It was noted that
a private individual was not released from his or her liability to reimburse
a debt even when declared bankrupt. The effects of debt adjustment on
the position of creditors therefore had to be assessed in the light
of their ability to obtain payment from the debtor’s future income
and assets. As the debt would be reduced and the debtor freed from his
or her liability to reimburse a debt only where debt adjustment by other
means was not possible, such an adjustment would not in reality weaken
the position of creditors.

50. The Government emphasised that, in the present
case, N.’s total debt had amounted to FIM 1,391,375 (EUR 234,012)
of which the applicant’s share had been approximately FIM 113,000
(approximately EUR 19,000). In drawing up the payment schedule, it had
been calculated that N. could afford to reimburse a total of approximately
FIM 420 (EUR 71) per month. On the expiry of the five-year payment schedule,
the applicant would have received a total of FIM 2,160 (EUR 363) from
N. It was highly unlikely that N. would ever have reimbursed his whole
debt to the applicant in the absence of a debt adjustment; on the contrary,
the latter would not even have received the amount fixed by that adjustment.
Furthermore, as there was in practice no market for individual claims
against insolvent persons, there was no reasonable basis for believing
that the applicant would, in the absence of the debt adjustment, have
been able to sell his claim for a sum exceeding the sum he had received
through the debt adjustment.

51. The Government pointed out that a distinction
had to be made between the nominal value of a claim, on the one hand,
and the real value of such a claim, on the other. The latter depended
crucially on the prospect of recovering the amount, that is, on the
actual credit risk. In the present case, the applicant’s claim had
been unsecured. Moreover, as a guarantor, the applicant had taken on
a special role in that he had specifically assumed the risk of the debtor’s
insolvency.

B. The Court’s assessment

1. General principles

52. The Court reiterates that Article 1 of Protocol
No. 1 comprises three distinct rules. The first rule, set out in the
first sentence of the first paragraph, is of a general nature and enunciates
the principle of peaceful enjoyment of property. The second rule, contained
in the second sentence of the same paragraph, covers deprivation of
possessions and makes it subject to certain conditions. The third rule,
stated in the second paragraph, recognises that Contracting States are
entitled, among other things, to control the use of property in accordance
with the general interest. The three rules are not “distinct” in
the sense of being unconnected: the second and third rules are concerned
with particular instances of interference with the right to peaceful
enjoyment of property and should therefore be construed in the light
of the general principle enunciated in the first rule. Both forms of
interference defined must comply with the principle of lawfulness and
pursue a legitimate aim by means reasonably proportionate to the aim
sought to be realised (see Jokela v. Finland, no. 28856/95, §§ 44 and 48, ECHR 2002-IV).

53. The notion of “public interest” is necessarily
extensive. In particular, the decision to enact property laws will commonly
involve consideration of political, economic and social issues. The
taking of property in pursuance of legitimate social, economic or other
policies may be in the public interest even if the community at large
has no direct use or enjoyment of the property. The national authorities
are in principle better placed than the international judge to appreciate
what is “in the public interest”. The Court, finding it natural
that the margin of appreciation available to the legislature in implementing
social and economic policies should be a wide one, will respect the
legislature’s judgment as to what is “in the public interest”
unless that judgment is manifestly without reasonable foundation (see The former
King of Greece and Others v. Greece [GC], no. 25701/94, § 87,
ECHR 2000-XII, and James and Others v. the United Kingdom, judgment of 21 February
1986, Series A no. 98, pp. 31-32, §§ 45-46).

54. The possible existence of alternative solutions
does not in itself render the contested legislation unjustified. Provided
that the legislature remains within the bounds of its margin of appreciation,
it is not for the Court to say whether the legislation represented the
best solution for dealing with the problem or whether the legislative
discretion should have been exercised in another way (see James and Others, cited above, p. 35, § 51).

55. An interference with peaceful enjoyment of possessions must nevertheless
strike a “fair balance” between the demands of the public or general
interest of the community and the requirements of the protection of
the individual’s fundamental rights. The concern to achieve this balance
is reflected in the structure of Article 1 as a whole, which is to be
read in the light of the general principle enunciated in the first sentence.
In particular, there must be a reasonable relationship of proportionality
between the means employed and the aim sought to be realised by any
measure depriving a person of his possessions or controlling their use.
Compensation terms under the relevant legislation are material to the
assessment of whether the contested measure respects the requisite fair
balance and, notably, whether it imposes a disproportionate burden on
the applicant (see The former King of Greece and Others, cited above, § 89).

56. Although Article 1 of Protocol No. 1 contains
no explicit procedural requirements, the proceedings in issue must also
afford the individual a reasonable opportunity of putting his or her
case to the responsible authorities for the purpose of effectively challenging
the measures interfering with the rights guaranteed by this provision.
In ascertaining whether this condition has been satisfied, a comprehensive
view must be taken of the applicable procedures (see Jokela, cited above, § 45).

2. Application in the present case

57. It is common ground that the applicant’s
claim constituted a “possession” within the meaning of Article 1
of Protocol No. 1. It is likewise undisputed that the 1993 Act interfered
with the applicant’s property rights. The Court notes that under Finnish
law the applicant’s claim against N. was based on the right of recourse
he had against N. by virtue of having reimbursed part of his debts.
The Court is satisfied that the applicant’s claim therefore constituted
a “possession” within the meaning of Article 1 of Protocol No. 1
(see, for example, Pressos Compania Naviera S.A. and Others v. Belgium,judgment of 20 November 1995, Series A no. 332, p. 21, §§
30-31). Likewise, the Court sees no reason to differ in so far as the
parties consider that the application of the 1993 Act constituted an
interference with the applicant’s property rights.

58. The Court observes that the adjustment of
N.’s debts under the 1993 Act almost extinguished the applicant’s
claim. The facts of this case bear resemblance both to deprivation and
to control of property, but they cannot easily be classified as a matter
to be examined solely under the second or the third rule contained in
Article 1 of Protocol No. 1. Moreover, the situations envisaged in the
second sentence of the first paragraph of Article 1 and in its second
paragraph are only particular instances of interference with the right
to peaceful enjoyment of property as guaranteed by the general rule
set forth in the first sentence of the first paragraph. The Court will
therefore examine whether the alleged interference with the applicant’s
property rights was compatible with the general rule in the first sentence
of the first paragraph of Article 1.

59. Turning to the question whether the interference
with the applicant’s property rights could be considered justified
by a public or general interest, the Court notes that a legislative
framework for permitting the adjustment of private individuals’ debts
on certain conditions has been put in place in a number of Contracting
States. It has no reason to doubt the Finnish legislature’s judgment
that there was, at the relevant time, an urgent and compelling public
interest in affording debtors the possibility of seeking a debt adjustment
in certain circumscribed situations. The Court can likewise accept that
there was, in principle, a reasonable relationship of proportionality
between the means employed and the aim sought to be realised.

60. The Court agrees with the applicant that a
transfer of property effected for no reason other than to confer a benefit
on a private party cannot be “in the public interest”. Nonetheless,
it is settled case-law that the compulsory transfer of property from
one individual to another may, depending upon the circumstances, constitute
a legitimate means of promoting the public interest. Thus, a transfer
of property effected in pursuance of legitimate social, economic or
other policies may be “in the public interest”, even if the community
at large has no direct use or enjoyment of the property transferred
(see James
and Others, cited above, pp. 30-32, § 40-45). The debt-adjustment
legislation clearly serves legitimate social and economic policies and
is not ipso
facto an infringement of Article 1 of Protocol No. 1.

61. The Court must, however, also satisfy itself
that the application of the 1993 Act in the case before it did not impose
an excessive burden on the applicant.

62. It is true that at the time when the applicant
agreed to guarantee N.’s loan he could not foresee the economic recession
and the subsequent legislation allowing for the adjustment of N.’s
debts. The detriment which this adjustment caused to the applicant was
no doubt significant in financial terms. It is equally true, however,
that when guaranteeing N.’s loan the applicant had to assess the risk
that N. would fail to comply with his payment obligation. He also had
to consider the possibility that N. might be declared bankrupt, in which
case his claim against N. would most likely become worthless. The fact
that in the case of a bankruptcy the applicant’s claims would have
remained legally valid and enforceable at a later stage does not alter
the fact that by entering into the guarantee agreement the applicant
accepted a risk of financial loss.

63. The Court would not exclude the possibility
that the court-ordered irrevocable extinction of a debt, as opposed
to the scheduling of payments of a debt over a longer period of time
or the bankruptcy of a private individual, could in some circumstances
result in the placing of an excessive burden on a creditor. The question
whether such a burden was placed on the applicant also depends on whether
the procedure applied provided him with a fair possibility of defending
his interests as one of some seventy creditors.

64. In this connection, the Court notes that submissions
from the applicant were heard by the District Court and he was thus
able to put forward his views on N.’s request for a debt adjustment
and the proposed payment scheme. The Court is satisfied that the District
Court carried out a thorough and careful assessment of the case and
finds no indication of any arbitrariness in the conclusions reached.
The applicant was further entitled to a full review by an appellate
court as regards both the decision to grant the debt adjustment and
the details of the adopted payment scheme. Finally, the applicant was
able to seek leave to appeal to the Supreme Court.

65. The Court further notes that N.’s payment
schedule and the resultant virtual extinction of the applicant’s claim
did not acquire legal force when the court proceedings ended in February
1997. Until the payment schedule ceased to be in force on 1 June 2001,
the applicant could have sought to have it extended or to have the payments
to himself increased if he considered, for instance, that N.’s ability
to pay had improved significantly.

66. Admittedly, the applicant had no way of verifying
that the information provided by N. in his application for a debt adjustment,
or later on, was correct. This can nevertheless be considered to have
been offset by the fact that N. was under an obligation to give accurate
information, that obligation being subject to criminal sanctions.

67. The Court finds no indication that the domestic
courts arbitrarily failed to consider the arguments put forward by the
applicant or that the adjustment of N.’s debts and the fixing of his
payment schedule were based on arbitrary or unreasonable considerations.
Thus, the proceedings viewed as a whole afforded him a reasonable opportunity
of putting his case to the competent authorities with a view to establishing
a fair balance between the conflicting interests at stake.

68. Turning to the retroactive effect of the 1993
Act, the Court notes that neither the Convention nor its Protocols preclude
the legislature from interfering with existing contracts (see Mellacher and Others v. Austria, judgment of 19 December 1989,
Series A no. 169, p. 27, § 50). The Court considers that a special
justification is required for such interference, but accepts that in
the context of the 1993 Act there were special grounds of sufficient
importance to warrant it. The Court observes that in remedial social
legislation and in particular in the field of debt adjustment, which
is the subject of the present case, it must be open to the legislature
to take measures affecting the further execution of previously concluded
contracts in order to attain the aim of the policy adopted. Furthermore,
other Council of Europe member States such as Norway and Sweden have
introduced legislation allowing for the adjustment of debts contracted
prior to its entry into force.

69. It is undoubtedly true that the reduction
in the applicant’s nominal claim is striking in its amount. However,
the burden imposed by N.’s debt adjustment was shared by several creditors,
the applicant’s nominal claim representing merely 8.4% of the total
amount of the claims. Moreover, it is obvious that, even before the
1993 Act was passed, the “market value”, if any, of the applicant’s
claim, that is, the amount which anyone willing to buy the claim would have
been ready to pay for it, was much less than its nominal value.

70. Bearing in mind also that by 1995, when N.’s
state of insolvency led him to seek a debt adjustment, he had effectively
not repaid his debt during those four years, apart from the sum of FIM
2,964 (EUR 499) which he had paid by September 1992, the Court concludes
that the applicant’s claim had already been rendered highly precarious
before the debt adjustment for reasons not attributable to the State
under the Convention. In these circumstances, the burden imposed on
the applicant by the 1993 Act cannot be regarded as excessive.

71. Accordingly, there has been no violation of
Article 1 of Protocol No. 1.

FOR THESE REASONS, THE COURT UNANIMOUSLY

Holds that there has been no violation of Article 1 of Protocol
No. 1.

Done in English, and notified in writing
on 20 July 2004, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.